Poverty Issues in Infrastructure Regulation: Choices and Dilemmas, Opportunities and Pitfalls

Transcription

1 Poverty Issues in Infrastructure Regulation: Choices and Dilemmas, Opportunities and Pitfalls International Workshop on Equitable Access to Basic Services: Insights for Latin America São Paulo, Brazil December 5, 2008 Ashley C. Brown Executive Director, Harvard Electricity Policy Group John F. Kennedy School of Government Harvard University Of Counsel, Dewey & LeBoeuf

2 Categories of Issues A. Externalities: Social and Environmental B. Network Benefits C. Subsidies and Cross-Subsidies D. Enforcement Issues 2

3 A. Externalities: Social Issues Regulatory Focus: Inward or Outward? 1. Examples of Social Issues in Regulation a. Poverty b. Environment c. Economic Development d. Health and Welfare e. Literacy and Education 3

4 A. Externalities: Social Issues Regulatory Focus: Inward or Outward? 2. Case for Inward Focus a. Limited Legal Jurisdiction b. Political Nature of Social Issues vs. Non- Political Regulation c. Inherent Conflict Between Economic Efficiency and Social Objectives d. Breadth of Social Issues vs. Narrow Technical Expertise e. Who Defines Social Issues for Regulators? 4

5 A. Externalities: Social Issues Regulatory Focus: Inward or Outward? 3. Case for Outward Focus a. Social Issues Not Always Anticipatable by Policy Makers b. Social Issues Often Unavoidable c. Availability of Efficient Regulatory Remedies d. De-Politicization of Difficult Social Issues e. Obvious, Self Defined Issues (e.g. Poverty) vs. Complex Undefined Issues (e.g. Environment) f. Ill Defined Boundaries Between Regulatory and Social issues (e.g. Rate Design) 5

6 B. Network and Societal Benefits to Serving the Poor Benefits of Greater Access to Network a. More Contribution to Fixed Costs b. Broader Access in Telecommunications c. Reduced Social Spending (e.g. Health) d. Environmental Protection (e.g. Protecting Aquifers, Reduced Air Pollution) e. Economic Development (e.g. Micro- Enterprises) 6

7 Who Decides on Subsidies: Government Policy Makers or Regulators? 1. Case for Government Policy Makers a. More Political Accountability b. Better Positioned to Balance all Considerations c. Better Positioned to Deal with the Politics of Subsidies d. Access to Public Treasury: Ability to Subsidize as well as Cross-Subsidize e. Subsidies are Less Likely to Interfere With Efficient Pricing f. Less Dependent on Monopoly Structure g. Stronger Legal Authority 7

8 Who Decides on Subsidies: Government Policy Makers or Regulators? 2. Case for Regulators a. Less Exposed to Political Interference b. Better Positioned to Design, Sustain and Oversee Efficient Programs and Targeting c. Better Understanding of Sector Specific Considerations d. Better Understanding of Pricing Considerations e. Better Understanding of Cross-Subsidization Effects f. Better Understanding of Consumer Behavior 8

9 Rate Design Considerations in Cross-Subsidies A. Covering Variable Costs B. Contribution to Fixed Costs C. Avoiding Uneconomic Bypass D. Non-Bypassable Source of Revenue 9

10 Structural Considerations in Designing Subsidies 1. Consumption Based a. Lower Rates for Initial Block of Consumption b. More Reliance on Variable Rather than Fixed Charges Pros and Cons of Consumption Based Approach + Relatively Easy to Administer + Consistent With Traditional Approach to Tariff Design + Efficient Price Signal However - Does Not Efficiently Target Intended Beneficiaries - Not Always Consistent with Social Objectives (e.g. health equipment) 10

11 Structural Considerations in Designing Subsidies 2. Income Based (Income Defined Eligibility Requirements) Pros and Cons of Income Based Approach + Efficient Targeting + Transparent However - Inefficient Price Signal - Complex Administration 11

12 Structural Considerations in Designing Subsidies 3. Geographically Based (e.g. Rural, or Distressed Region) Pros and Cons of Geographically Based Approach + Easy to Administer + Transparent However - Highly Inefficient Targeting - Easily Politicized Note: On Grid and Off Grid / Renewable and Non-renewable Considerations 12

13 Structural Considerations in Designing Subsidies 4. Age Based (e.g. Elderly or Children in Household) Pros and Cons + Easy to Administer + Transparent However - Highly Inefficient Targeting 13

14 Subsidy Conditionalities 1. Technology 2. Performance 14

15 Subsidy Conditionalities 1. Technology (e.g. Pre-Paid or Real Time Meters Combinable With Other Approaches) Pros and Cons + Increases Efficiency + Appropriate Signals + Easy to Administer However - Initial Expense - Consumer Education 15

16 Subsidy Conditionalities 2. Performance (e.g. Energy Efficiency, Consumption Cap, Participation in Other Programs) Pros and Cons + Increases Efficiency + Optimizes Consumer Benefit However - Complex Administration - Consumer Education 16

17 D. Enforcement Issues 1. Non-Technical Losses (e.g. Theft, Meter Tampering, Illegal Connections) 2. Non-Payment Issues - Distinguishing Between Those Who Cannot Pay From Those Who Do Not Pay - Bill Collection Policy - Disconnection Policy 17